Budget 2018: GDP Lowest Since China War

Priyanka Dutta, Kolkata: Finance Minister Arun Jaitley on Thursday presented the Union Budget on the floor of the Parliament. The government will develop two defence industrial production corridors and bring out an industry-friendly military production policy to promote the defence industry, Finance Minister Arun Jaitley said today.

India’s defence budget has been hiked by 7.81% to Rs 2,95,511 crore from Rs 2,74,114 crore last year, once again fading the hopes for any major jump in military modernization this year despite heightened tensions with both Pakistan and China along the unsettled borders.

Moreover, the defence budget includes a capital outlay of just Rs 99,563.86 crore for new weapon systems and modernization, which is dwarfed by the revenue expenditure (day-to-day running costs, salaries etc) of Rs 1,95,947.55 crore. The defence budget does not include Rs 1,08,853 crore separately allocated for defence pensions.

On his part, finance minister Arun Jaitley declared the government was focusing on developing connectivity infrastructure in border areas to secure the country’s defences. “Rohtang tunnel has been completed to provide all weather connectivity to the Ladakh region. Contract for construction of Zozila Pass tunnel of more than 14 kilometer is progressing well. I now propose to take up construction of tunnel under Sela Pass (in Arunachal Pradesh),” he said.

In his budget speech here, he appreciated the role played by the armed forces in meeting challenges on the country’s borders as well as in managing the internal security environment, both in Jammu and Kashmir and the North East.

In 2016-17 the underutilization was Rs 7393 crores (10.5 percent). Over the years the emphasis on process in procurements is so much that outcomes do not seem to matter and allocations remain unspent. The recommendations of the Parliamentary Standing Committee that capital allocations should be “Roll on” and “Non- Lapsable”, need to be implemented so that funds are spent on what they are specified for.

In 2016-17 only 12 percent of the total modernisation budget of Rs 70000 Crore was available for signing new schemes as the rest was earmarked for committed liabilities of earlier contracts. In 2017-18 the modernisation budget for Army and Navy declined, while Air Force increased due to some big contracts.

According to figures tabled by the Ministry of Defence in the Lok Sabha during the Winter Session of Parliament last month, India will have less squadron by 2025 than it currently possesses.

The Indian Air Force currently possesses 32 squadrons but three squadrons of MiG-21 aircraft will be phased out by 2020. By 2019, the government plans the introduction of two squadrons of Su-30MKIs. Two squadrons of the Jaguar are also set to retire during this period. Between now and 2025, the government plans to procure two additional squadrons of the Su-30MKI, two squadrons of the Rafale and six Squadrons of the Tejas, a single-engine fighter. So, while India will see 12 squadrons retire by 2024, the country will have added only 10 to offset those losses by 2025.

The Army, too, needs new equipment and fast. The Army is in urgent need of reconnaissance helicopters and Army Chief Bipin Rawat, at the Army’s annual press conference this month. Speaking on the acquisition of new assault rifles for the Army, the chief struck a realistic note. “The Hi-Tech assault rifles with night-firing capability cannot be given to the entire army because they are expensive. So they will be given to infantry soldiers at the border, who face the adversary first,” he said.

According to Defence experts, the defence budget to be able to effectively contribute to both modernising and sustaining military capability the allocation needs to be pegged at 2 to 2.5 per cent of GDP. Concomitantly all the connected functions need urgent reform – digitised capital procurement, optimised revenue expenditure, incentives for Make in India, structures and policy for joint military planning and prioritisation of requirements.